Professional Documents
Culture Documents
October 2003
www.TorontoEnterpriseFund.ca
The Toronto Enterprise Fund supports the development of social purpose enterprises
working with homeless and low-income people. Social purpose enterprises create both
community connections and economic opportunities for homeless and at-risk populations
by developing businesses that balance both revenue generation and a social mission.
This research and report was compiled and written by Eko Nomos, a consulting firm
specializing in the learning and evaluation of community development programs.
I.S.B.N. 0-921669-31-3
What is a Social Purpose Enterprise?
Introduction
Early into the Toronto Enterprise Fund, the Program Partners adopted the term “social
purpose enterprise” because it more accurately described the enterprise development
initiatives that the Program has funded. The Toronto Enterprise Fund identifies social
purpose enterprise as a subset of Community Economic Development that specifically
refers to a range of for-profit and not-for-profit ventures combining social development and
earned income objectives.
Social Purpose Enterprise is not just about organizations doing business, but about
organizations doing social and community development work in a new, more practical and
holistic way that crosses the entrenched lines between business and the social sector.2
1
Seedco, When Good Work Makes Good Sense: Social Purpose Business Case Studies. (November 2002), p. ii .
http://www.seedco.org/about/news/NVN_Final.pdf)
2
Organizations could emerge that shift away from an emphasis on “collected” income to earned income, and from
maximizing benefits for the owners towards benefits for the whole of society. Non-profit enterprises, sustainable
enterprises, ethical social institutions, community development financial institutions and civic enterprises could play a
role in this transformation. See Katherine Fulton, What’s Next? The Shifting Context for Social Entrepreneurship, Key
Note address at the 4th National Gathering of Social Entrepreneurs, December 4th 2002 in Minneapolis.
1
What is a Social Purpose Enterprise?
The Non-profit Venture Network (NVN) in New York defines a social purpose business as
“a business activity started by a non-profit organization that applies market-based
solutions for the purposes of furthering the mission of the organization, generating income
and addressing social needs”.4
In a recent article, Jerr Boschee and Jim McClurg argue that “earned income” has not
been sufficiently emphasized in this definition of social entrepreneurship. They raise
important distinctions between the notion of “entrepreneurship” and “innovation”:
“Unless a non-profit organization is generating earned revenue from its activities, it is not
acting in an entrepreneurial manner. It may be doing good and wonderful things, creating
new and vibrant programs: but it is innovative, not entrepreneurial. … Why is this
distinction so important? Because only earned income will ever allow a non-profit to
become sustainable or self-sufficient. … It’s one thing to design, develop and implement
a new program – and quite another to sustain it without depending on charitable
contributions and public sector subsidies.“7
Boschee and McClurg maintain that the lack of emphasis on earned income in prevalent
definitions of social entrepreneurship is damaging to the field: “We think that it [a
definition that omits earned income] is not only conceptually flawed, but also
psychologically crippling. It lets non-profits off the hook. It allows them to congratulate
themselves for being “entrepreneurial” without ever seriously pursuing sustainability or
self-sufficiency.” 8
3
Both definitions are drawn from The New Social Entrepreneurs: The Success, Challenge and Lessons of Non-Profit
Enterprise Creation. (Roberts Foundation: September 1996).
4
Seedco, op. cit., p. ii.
5
ibid., paraphrased from Roberts definition.
6
Referenced in Jerr Boschee and Jim McClurg, Toward a better understanding of social entrepreneurship: Some
important distinctions, 2003, p. 2.
7
ibid., p. 1.
8
ibid., p. 2.
2
What is a Social Purpose Enterprise?
Clearly earned income must be central to social purpose enterprise and is a crucial
determinant of viability. Yet for enterprises seeking to promote direct social benefits
(through employment and training) to low-income, marginalized populations, it is worth
debating the degree to which earned income should be emphasized as a component of
viability.
One major challenge in the development of the enterprises funded in this program has
been to reconcile the contradictory requirements of promoting business self-sufficiency
through earned income, and simultaneously advancing the social objective of promoting
the social and economic engagement of homeless people. Potential for earned income
can be seriously reduced by the ‘inefficiencies’ and human development costs associated
with integrating employment and asset building into those enterprises.
The Toronto Enterprise Fund businesses have thus worked to create realistic
expectations for earned income and achieve their social objectives, while finding a way to
ensure that the enterprises avoid some of the pitfalls common to grant-based funding: a
‘project’ mentality, over-dependence on funding, and a lack of competitive
entrepreneurialism.
The Toronto Enterprise Fund has been developing a new formula for separating social
and business costs, in order to clarify the components that merit continued external
funding, and to create realistic expectations for earned income and sustainability. As a
consequence, the program’s definition of social purpose enterprise is a ‘work in progress’
that will be revisited and refined as we continue to consolidate and learn from these new
enterprises.